Speedy Payments Keep Gig Workers Loyal to Online Platforms

With inflation near multi-decade highs, a growing number of individuals are clocking in and logging onto platforms to take advantage of the on-demand work environment.

Most gig economy platforms surveyed in a recent PYMNTS study see double-digit growth in the number of 1099 workers they will have to pay in 2023.

But with growth comes some pain points:  These platforms fear that the inability of their payables infrastructure to keep pace could blunt their opportunity to grow and capture share.

Operational efficiency is top of mind right now, as between mid-November and February, gig platforms and any number of enterprises will be collecting, logging and disseminating all sorts of forms, payments logs and tax documents to freelancers and governments ahead of tax season. Compliance is no easy task, and the platforms are juggling all of this while still managing swelling demand into the holiday season.

Well beyond the confines of tax reporting, Routable Co-founder and CEO Omri Mor said that the platforms must have a “compelling pitch” to entice individuals to come and try it out. Once they get those workers on board, the challenge becomes keeping them there. Critical to it all is transparency of payments, about the work available, and a (shortened) time to collect.

“That’s the hardest part of all this,” said Mor. The platforms themselves have had to grapple with churn over the years, and the environment is competitive. The ideal relationship is where the gig worker finds the platform experience streamlined and lucrative enough that users are interested and successful, enough so that they come to depend on the platform to garner the bulk of their income.

Show Me the Money

“We’ll see more participation, even from formerly non-gig economy workers who have yet to try it, stepping into the gig economy next year,” said Mor, who added that the number one question that’s asked is when the money will hit their accounts.

Vendor management is more complex as increasing scale means more 1099s, more emails, and invoices. Data proves to be an advantage in the gig economy, said Mor, as gig economy companies can “learn” the behavior of a vast majority of the workers on the platform, and can be in consistent communication with them to help funnel the right opportunities their way — and give them a sense of when they’ll get paid.

That increased usage on the part of the worker enables the platform to offer the individual’s services to buyers (the other side of the platform) more often. And as Mor noted, “we’re seeing a lot of workers who are combining gig economy jobs with full time work” in order to pay down mounting credit card debt or afford a mortgage payment that is quite a bit more expensive than it was just a year ago.

“Finance teams are partnering with operations teams to balance the burden of an increase in gig economy activity, and prospecting gig workers as they apply for work,” said Mor. And those teams are working together to deliver on the promise of speedy compensation — paying today, in advance, or as soon as the job is done.

“That’s the North Star” for the platforms, said Mor, “where the gig worker will want to find out ‘how much money can I make here per month’…or even weekly. Payments is a huge part of the retention angle,” he added.

The growing demand from companies looking for freelancers and growing supply are showing up in the numbers. The data show that  87% of gig economy companies expect their payables volume to grow more than 10% through the next three years.

But 17% of the gig economy companies surveyed say payables inefficiencies are their most serious challenge. The payment methods that matter the most right now are the fastest ones, including RTP, push-to-card methods and PayPal. No matter the payment modality, said Mor, “cash is king.”

The companies seeking freelance talent cannot manage all of this in house — there are legal requirements tied to connecting 1099s before payments, and the challenge of utilizing tech infrastructure for mass payouts.

“The ‘supply chain’ of onboarding gig workers or sending payments gets more complex, and the number of steps gets compounded,” said Mor. Two-thirds of platforms that pay more than 2,500 workers, PYMNTS and Routable found, say that automation is among their top priorities.

Automation comes in different forms, he said, but generally speaking, databases and ERP systems need to be in sync so that there’s no need to export data into a CSV system, or to manually enter data into programs. Routable’s offerings, he said, make bill payments and mass payouts seamless, with API allowing clients to build out payments infrastructure.

“What we’re trying to solve for is ‘Can I solve this problem with more humans and more manual work, or can I handle this scale and even more with the same team and having each team member more efficient?’ One of the things we strive for is to give people time back,” he said.